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My impression of Apple is that they have no interest in competing on price. They are a premium brand. In the same way Louis Vuitton could sell cheaper handbag

My impression of Apple is that they have no interest in competing on price. They are a premium brand. In the same way Louis Vuitton could sell cheaper handbags compete on price because they bought & optimized the costs of making leather, but they’re not going to.

toyg 6y ago
Yeah this. Apple already has fairly-successful and well-established price levels, they are not going to drop them anytime soon. If these chips really are significantly cheaper to make, that just means they will make more money per chip, at least until setup costs go to zero. Cook is a supply-chain guy, he knows the score: final price is what the market will bear, not some fixed calculation over costs; you win by squeezing costs down and pushing prices up at the same time any time you can.
lotsofpulp 6y ago
Apple lowered the entry price of an iOS phone to $400 this year. There’s more profit to be made via monthly payments for services, so getting more iOS and macOS products into people’s hands is in their interest. I’m not saying they will sell third rate quality products like $400 laptops or $200 phones and tablets, but they are interested in lower prices and making up for it by getting people to purchase more from the whole ecosystem.
- spideymans 6y ago
  Apple has lowered the prices on all of their major product lines: iPhone SE ($400), iPad ($329), Apple Watch ($279). I can't see anything in the way of Apple creating a lower priced MacBook SE at around, say, $700. With that move, Apple could essentially own the technology stack (iPhone, iPad, Mac, accessories, etc...) of millions of consumers previously priced out of the Apple ecosystem, consequently driving services revenue.
  - treesknees 6y ago
    It would be interesting to know how companies like Apple account for the market of older models and how that feeds into their services revenue. For example if you can go on Woot and purchase an iPhone 8 for $399, while Apple didn't make money off of that sale, they will certainly make money from app purchases and iCloud subscriptions. And at $399 there's bound to be people willing to purchase an iPhone even if it's older. With Apple's iOS support reaching back several generations, it's not always a bad deal. So in a way, even though Apple isn't making money directly off the sale of that old iPhone, they're still able to feed this lower-end market and make money from apps and services, without directly lowering their prices and maintaining their perceived high-end status. Edit: I gave an iPhone example but it certainly extends to the Mac lineup as well.
    - lotsofpulp 6y ago
      FYI, you can buy a brand new iPhone SE from Apple.com for $400.
      - treesknees 6y ago
        I made up the numbers as an example. It doesn't really matter, my point is that Apple's old devices, be it iPhone or Mac, still have value years later. So even when people are fishing the old stuff from the bargain bin sites, Apple is still making money off of them. As a result, Apple doesn't need to compete with the $400 Dell because people will still be buying the 5-year-old MacBook Air from the bargain site and with it, buying app/iCloud subscriptions.
amelius 6y ago
> They are a premium brand. How can they be a "premium" brand if they already own a large percentage of the market? Premium, by definition, is only for a small group of people. Am I missing something?
- PopeDotNinja 6y ago
  I’m trying to communicate they’d rather make more per unit sold, and lowering costs while maintaining quality increases is good for making more money. Maybe upscale would be better than premium.
- jimbokun 6y ago
  > How can they be a "premium" brand if they already own a large percentage of the market? That's what makes them one of the largest companies in the world. Premium profit margins with commodity market share.
- chungus_khan 6y ago
  I'd say 17% of the computer market is sizable but still small and segmented enough to be premium. Macs don't factor into the purchasing decisions of the vast majority of ordinary people.

toyg 6y ago

Yeah this. Apple already has fairly-successful and well-established price levels, they are not going to drop them anytime soon. If these chips really are significantly cheaper to make, that just means they will make more money per chip, at least until setup costs go to zero. Cook is a supply-chain guy, he knows the score: final price is what the market will bear, not some fixed calculation over costs; you win by squeezing costs down and pushing prices up at the same time any time you can.

lotsofpulp 6y ago

Apple lowered the entry price of an iOS phone to $400 this year. There’s more profit to be made via monthly payments for services, so getting more iOS and macOS products into people’s hands is in their interest. I’m not saying they will sell third rate quality products like $400 laptops or $200 phones and tablets, but they are interested in lower prices and making up for it by getting people to purchase more from the whole ecosystem.

spideymans 6y ago
Apple has lowered the prices on all of their major product lines: iPhone SE ($400), iPad ($329), Apple Watch ($279). I can't see anything in the way of Apple creating a lower priced MacBook SE at around, say, $700. With that move, Apple could essentially own the technology stack (iPhone, iPad, Mac, accessories, etc...) of millions of consumers previously priced out of the Apple ecosystem, consequently driving services revenue.
- treesknees 6y ago
  It would be interesting to know how companies like Apple account for the market of older models and how that feeds into their services revenue. For example if you can go on Woot and purchase an iPhone 8 for $399, while Apple didn't make money off of that sale, they will certainly make money from app purchases and iCloud subscriptions. And at $399 there's bound to be people willing to purchase an iPhone even if it's older. With Apple's iOS support reaching back several generations, it's not always a bad deal. So in a way, even though Apple isn't making money directly off the sale of that old iPhone, they're still able to feed this lower-end market and make money from apps and services, without directly lowering their prices and maintaining their perceived high-end status. Edit: I gave an iPhone example but it certainly extends to the Mac lineup as well.
  - lotsofpulp 6y ago
    FYI, you can buy a brand new iPhone SE from Apple.com for $400.
    - treesknees 6y ago
      I made up the numbers as an example. It doesn't really matter, my point is that Apple's old devices, be it iPhone or Mac, still have value years later. So even when people are fishing the old stuff from the bargain bin sites, Apple is still making money off of them. As a result, Apple doesn't need to compete with the $400 Dell because people will still be buying the 5-year-old MacBook Air from the bargain site and with it, buying app/iCloud subscriptions.

amelius 6y ago

> They are a premium brand. How can they be a "premium" brand if they already own a large percentage of the market? Premium, by definition, is only for a small group of people. Am I missing something?

PopeDotNinja 6y ago
I’m trying to communicate they’d rather make more per unit sold, and lowering costs while maintaining quality increases is good for making more money. Maybe upscale would be better than premium.
jimbokun 6y ago
> How can they be a "premium" brand if they already own a large percentage of the market? That's what makes them one of the largest companies in the world. Premium profit margins with commodity market share.
chungus_khan 6y ago
I'd say 17% of the computer market is sizable but still small and segmented enough to be premium. Macs don't factor into the purchasing decisions of the vast majority of ordinary people.